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A Ratio is a fraction. Odds are a type of ratio. Fraction s Ratios 1/4 Odds 1:3.

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Presentation on theme: "A Ratio is a fraction. Odds are a type of ratio. Fraction s Ratios 1/4 Odds 1:3."— Presentation transcript:

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2 A Ratio is a fraction. Odds are a type of ratio. Fraction s Ratios 1/4 Odds 1:3

3 For example, if you go fishing and you catch 3 largemouth bass and 1 trout, The probability (or risk ) of catching a trout is the ratio below: ratio = # of trout caught = 1 = 0.25 total # of fish caught 4 ***Note that this differs from odds. Odds are simply a ratio of the probability that an event will occur versus the probability that the event will not occur. odds = a type of ratio with respect to probabilty odds = probability 1-probability then the odds of catching a trout = 1/ /4 = 4 * 3 = 12 = 3 = 0.33 or 1:3 ***Note: With risk, the total is always in the denominator. With odds, the total is the sum of the numerator and denominator.

4 What are the payoff odds if Nicky wins this race? (0.15(1100) – 375) / 375 = 1.49 ~1.50 so 1.50:1 or 3:2 Meaning, for every $1 you bet, you will get $1.50 in return. What is the overall monetary risk if he wins this race? 2/5 = 0.4 = 40% meaning, bidder will get 40% of the $ available

5  The 3 most Important Financial Ratios:


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